A

PROJECT ON

CREATION OF TRUST AND RIGHT AND LIABILITES OF

BENIFICIRIES

SUBMITTED TO:
DISHA ATRI
ASSISTANT PROFESSOR
TRUST AND EQUITY

SUBMITTED BY:
TUSHAR MISHRA
ROLL NO. 31, BCOM LLB 8TH SEMSTER

DATE OF SUBMISSION: 17.04.2017

SCHOOL OF LAW
GURUGHASIDAS CENTRAL UNIVERSITY,
BILASPUR

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 TABLE OF CONTENTS

Declaration……………………………………………………3

Certificate…………………………………………………….4

Acknowledgement……………………………………………5

Table of Cases………………………………………………...6

Research Methodology………………………………………7,8

Introduction……………………………………………………9

Creation,,,,,,,,,,,,,,,,,,,,,,………………………………………10.11

Who may create trust……………………………………......11,12

Right of beneficiary…………………………………………12,14

Liabilities of benficores ……………………………………….15

Case Law……………………………………………………………16

Concliusion ………………………………………………………....17

Bibliography ……………………………………………………….28

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DECLARATION

I, TUSHAR MISHRA, Roll No. 31, BCOM LLB 8TH Semester of Guru Ghasidas
University do hereby declare that, this project is my original work and I have not copied this
project or any part thereof from any source without due acknowledgement. I am highly
indebted of the my subject professor who guide me and help me out in making this project,
authors of the books that I have referred in my project as well as the writers of the articles
and the owner of the information taken from website on it. It is only because of their
contribution and proper guidance of my faculty advisor DISHA ATRI , that I was able to
gather lights on this project.

TIUSHAR MISHRA

Roll No. 31

BCOM LLB 8TH SEMSTER

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CERTIFICATE

I am glad to submit this project on “RIGHT OF BEBEFICIRES AND CREATION OF

TRUST UNDER TRUST ACT” as a part of my academic assignment. The project is based
on relationship between union and state.It further they dealing with the power of union and
state are some different powers. I hope this be significant for academic purposes as well as
prove informative to all readers.

Here though I declare that this paper is an original piece of research and all borrowed texts
and ideas have been duly acknowledged.

TUSHAR MISHRA Faculty Signature : Roll No. 31

BCOM LLB 8TH SEMSTER

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ACKNOWLEDGEMENT

I would like to express my earnest and deepest gratitude to, DISHA ATRI Faculty for
giving me this opportunity to do a project on such a valuable topic of “RIGHT OF
BEBEFICIRES AND CREATION OF TRUST UNDER TRUST ACT”. I am grateful for the
assistance, guidance and support that were extended during the course of excellent research.
I am also thankful to the Department for providing the resources necessary for the research
work. I thank my parents and my friends for their moral support and love throughout my
research work and project preparation. Above all I thank God Almighty for blessing me with
the health and vitality to complete the project.

TUSHAR MISHRA

ROLL NO. 31

BCOM LL.B 8th SEMSTER

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Table of Cases

Case Name Page No.

1) Sunders V. Vauiter, (1841) Cr. Ph. 240 16

2) Knight v. Knight, (1860) 3 Beau atp.173 10

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Research Methodology

Title

Creation of trust and right of beneficires.

Problem

It is very hard to write such a vast topic in few pages if we have to deal with all federalism as
well as the relationship between union and state.

Rationale

To study the who may create trust?

To study the liabilities of beneficiaries.

Objective of the project

The objective of the project is for the fulfillment of assignment work given to me. The
fundamental objective of my research is to analyze the A Right of beneficiary under the trust
act . The object of writing this project is to give a clear picture of the Liability under trust
act The Scope is confined only to Indian trust law.

Review of literature

1. Singh G.P..
2. Ahmed Aqil.

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Source of Data

The secondary sources of data collection such as the books and various journals have been
used with the help of the access to the library and the software. The database which is used
in this particular project is from the library, Google books and articles from the internet.

Method of Research

For this project, I followed doctrinal method which includes both descriptive method and
analytical method of writing throughout this project. Books and other reference materials are
taken from the Department Library and this books are very helpful for the completion of this
research paper.

Time limit

Time limit for submission this project is 17th of April, 2017 and it takes two months for
completion of project on “Right and liabilities of beneficiary .”.

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 “Trust & Equity”
:-Creation of Trust & Right & Liabilities of Beneficiaries-:

1. INTRODUCTION => Trust has been rightly – claimed by various writers of

eminence on the subject as the highest achievement of equity in England and it would be
useful to note some of these opinions. Trusts Originating in and as developed by the court of
Chancery in England have now become immensely popular and useful in among, other
countries India and its importance in the legal, commercial, social and religious life of today
need not be further emphasized. The common Law in England was deficient in certain
matters of natural and universal justice and particularly in matters of trust and
confidence it took no cognizance. Thus the Common Law being silent on the subject,
Courts of Equity, considering the conscience of the party entrusted, as bound to perform
the trust, in order to prevent a total failure of justice, inferred to compel the
performance of it. The Courts of Equity assisted the trustees, whenever they sought the aid
of the Courts as to the establishment, management, or execution of the trust.

Indian Trust Act—How far based on pre-existing Laws.—The Indian Trust Act, 1882,
contains no law which the courts were not, before its passing, bound to administer, without
its assistance. The only difference that the Act made was that, instead of the courts
grouping for principles and precedents to give their decisions, the principles would be made
ready for the courts to follow.

Definition of Trust - Section 31 of the Indian Trust Act.—This section defines a trust as “an
obligation annexed to the ownership of property, and arising out of a confidence reposed in
and accepted by the owner, or declared and accepted by him for the benefit of another or of
another and to owner”

Underhill defines - Trust “as an equitable obligation either expressly undertaken or

constructively imposed by the court, whereby the obligor is bound to deal with property overt
which he has control for the benefit of persons of whom he may or may not himself be one
and any of whom any enforce the obligation”.

2. CREATION OF TRUST => I need be recalled that one of the bases for the
classification of trust was with regard to the mode of their creation and their principal
divisions of trust under their classification are: express trust, implied trust and constructive
trust. It is, therefore proper and necessary to consider the subject under two heads; (1) express
Trust, (2) Trusts arising by their operation of Law. Maitland also classified trust according to

1
Define Trust in Sec 3 of Trust Act, Singh G.P., Principle of Equity p. 242, (Central Law Agency, Allahabad, 9th
edn and Reprint, 2015)
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their modes of creation in to above two heads.

Creation of trust - Subject to the provisions of section 5, a trust is created when

theauthor of the trust indicates with reasonable certainty by any words or acts (a) an
intention on his part to create thereby a trust, (b) the purpose of the trust, (c) the
beneficiary, and (d) the trust-property, and (unless the trust is declared by will or the
author of the trust is himself to be the trustee) transfers the trust-property to the trustee
Illustrations

(a) A bequeaths certain property to B, "having the fullest confidence that he will
dispose of it for the benefit of" C. This creates a trust so far as regards A and C.
(b) A bequeaths certain property to B "hoping he will continue it in the family". This
does not create a trust, as the beneficiary is not indicated with reasonable certainty.

In Shiv Nath Prasad V. State Of Bengal & Ors, 2 the Supreme Court has held that a ,mere
declaration for creation of trust, can create a trust obligation , particularly when the settler
in the sole trustee under trust.

3. RULE OF THREE CERTINITES => The three certainties of trust in the

deceleration of an effective purpose trust are commonly called the three certainties of an
express and were first laid down and named as such by Lord Langdale in Knight v.
Knight,3 no trust can arise in case the deceleration is indefinite with regard to one or more
of these essential.
1. Certainty as to intention.
2. Certainty as to the subject – matter if trust.
3. Certainty as to the subject of the trust.

4. WHO MAY CREATE TRUST? => Any person or corporation capable at law
or in equity of alienating to any extent trust property or an interest in property, either inter
vinous or in the case of an individually by a testamentary instrument is to the some extent
capable of creating a trust in that property or interest or of disposing thereof I trust inter
vivos or in case of an individually by a testamentary instrument. Section 7 of the Indian
trust act lays down that:-

2
(2006) 2 SCC 757, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 235, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)
3
(1860) 3 Beau atp.173, , Singh G.P., Principle of Equity p. 305, (Central Law Agency, Allahabad, 9th edn and
Reprint, 2015)

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A trust may be created - (a) by every person competent to contract.
(b) with the permission of a principal Civil Court of original jurisdiction, by or on
behalf of a minor; but subject in each case to the law for the time being in force as to the
circumstances and extent in and to which the author of the trust may dispose of the trust-
property.
It is clear from the provision of section 11 of contract act, which lays down that
“every person is competent to contract who is of the age of majority according to the law.

: Right of Beneficiaries:

Who is beneficiaries – Section 3: The persons for whom benefit the trust is to be held by
the trustee is called “beneficiary”. The person for whose benefit the confidence is
accepted by the trustee, is called, the “beneficiary”. In English Law the person on whose
behalf the rights are to be exercised are called the cestui que trust. While the legal title of
the trust property was vests in the trustee, the equitable title vests in the beneficiary. A
beneficiary is entitled to enforce the provisions of the trust. A person may at the same
time be trustee and one of the cestui que trust.

Persons who may be beneficiaries Section 9 - Disclaimer b y beneficiary.- Every person

capable of holding property may be a beneficiary. A proposed beneficiary may renounce his
interest under the trust by disclaimer addr essed to the trustee, or by setting up, with notice of the
trust, a claim inconsistent therewith.
The following may be beneficiaries under the law –
 The Crown.
 Corporations.
 Aliens.
 Married Woman.
 Unborn Person.4
Sole beneficiaries cannot himself be a trustee; a trustee can be one of the several
beneficiaries.5

5. RIGHTS OF BENEFICIRES => Right and liabilities of beneficiary have

together laid down in chapter IV of section 55 to 69 if the Indian Trust Act, 1882. Dr
Hanbury before taking up the rights and remedies of beneficiaries has aptly remarked:
“Equity being…. a string of loosely joined glosses on commonly, does not admit readily

4
Tagore V Tagore, 18 w.r. 375, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 238, (Central
Law Agency, Allahabad, 4th ed. 7 Reprinted 2011)

5
Air 1927 MAD, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 239, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)

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of scientific classification. There is bound to be a great deal of over developing.”6

1. (Section 55) Rights to rent and profits - the beneficiary has, subject to the
provisions of the instrument of trust, a right to rents and profits of the trust property.
The cestui que trust has a right to take rents and profits or income of the trust
property. But however, this right is subject such limitation as may be imposed by
the instrument of trust.
2. (Section 56) Right to specific execution.-The beneficiary is entitled to have the
intention of the author of the trust specifically executed to the extent of the
beneficiary's interest ; Right to transfer of possession. Right to transfer of
possession.-and, where there is only one beneficiary and he is competent to
contract, or where there are several beneficiaries and they are competent to
contract and all of one mind, he or they may require the trustee to transfer
the trust-property to him or them, or to such person as he or they may direct.
When property has been transferred or bequeathed for the benefit of a married
woman, so that she shall not have power to deprive herself of her beneficial
interest, nothing in the second clause of this section applies to such property
during her marriage.

Illustration - A transfers certain property to B and directs him to sell or invest it for the
benefit of C, who is competent to contract. C may elect to take the property in its original
character.

3. (Section 57) Right to inspect and take copies of instrument of trust,

accounts, etc.-The beneficiary has a right, as against the trustee and all persons
claiming under him with notice of the trust, to inspect and take copies of the
instrument of trust, the documents of title relating solely to the trust-property, the
accounts of the trust- property and the vouchers (if any) by which they are
supported, and the cases submitted and opinions taken by the trustee for his
guidance in the discharge of his duty.

It has been held that in Springetf V. Dashwood, 7 That the beneficiary has every right to
have accurate information regarding the state of the trust property.

4. (Section 58) Right to transfer beneficial interest - The beneficiary, if competent

to contract, may transfer his interest, but subject to the law for the time being in
force as to the circumstances and extent in and to which he may dispose of such
interest

6
Modern, Equity by H.G Hanbury, 4th ed.,p.325, Singh G.P., Principle of Equity p. 373, (Central Law Agency,
Allahabad, 9th edn and Reprint, 2015)

7
2.Giff 521, Singh G.P., Principle of Equity p. 376, (Central Law Agency, Allahabad, 9th edn and Reprint, 2015)

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Provided that when property is transferred or bequeathed for the benefit of a married
woman, so that she shall not have power to deprive herself of her beneficial interest,
nothing in this section shall authorize her to transfer such interest during her marriage.

5. (Section59) Right to sue for execution of trust - Where no trustees are

appointed or all the trustees die, disclaim, or are discharged, or where for any
other reason the execution of a trust by the trustee is or becomes impracticable, the
beneficiary may institute a suit for the execution of the trust, and the trust shall,
so far as may be possible, be executed by the Court until the appointment of a
trustee or new trustee.
In Salisbury V. Bengal, 8 “The court of equity never wants a trustee, and whenever there is
no trustee is however limited person in whom the legal statute is vested or legal
representative.

6. (Section60) Right to proper trustees - The beneficiary has a right (subject to

the provisions of the instrument of trust) that the trust- property shall be properly
protected and held and administered by proper persons and by a proper number of
such persons.
Principle – The principle of Right of proper trustee is based on the principle of on the
interest of the cesestui que trust. A beneficiary is interest in the proper administration and
preservation of trust property.

Who is Proper Person? - Under the Indian Trust Act the following are not proper to be
trustee; -

 An alien enemy.
 A person domiciled abroad.
 A person having inconsistent interest with that of the beneficiary.
 An insolvent.
 Minor

7. (Section61) Right to compel to any act of duty -The beneficiary has a right
that his trustee shall be compelled to perform any particular act of his duty as
such, and restrained from committing any contemplated or probable breach of
trust.
8. (Section62) Wrongful pu rch ase by trustee.

6. DOCTRINE OF TRACING – Tracing is a claim in rem not in persoam. The

Doctrine is founded on principal that once a trust is impressed on property, It attaches itself

8
Swanet, 608, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 305, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)

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into whatever shape it may be converted. The doctrine is not confined only to those cases
where there has been conversion of trust property, but to all cases where the trust property
comes in to hands of a stranger who occupies a fiduciary position.

7. RIGHT AGAINST THE TRUST PROPERTY –

 Right to recover from trustee – The right arise –
a) Against the trustee himself personally.
b) Where the trustee having wrongfully disposed of the trust property subsequently
required the trust property himself.9
 Right in Case of Blended Property (Sec. 66) - Where the trustee
wrongfully mingles the trust-property with his own, the beneficiary is
entitled to a charge on the whole fund for the amount due to him.

: Liabilities of Beneficiaries:
Where a trustee commits a breach of trust at the investigation or with the consent of one or
some of the several beneficiaries under a trust, such beneficiary is liable for the loss caused
thereby to the trust estate and the other beneficiaries are entitled to have all the beneficial
interest under the trust impounded until the loss caused by the breach has been
compensated.10
The trust of these are dealt with in section 68 of the Indian Trust Act - Liability of
beneficiary joining in breach of trust.Where one of several beneficiaries—
a) joins in committing breach of trust, or
b) knowingly obtains any advantage therefrom, without the consent of the other
beneficiaries, or
c) becomes aware of a breach of trust committed or intended to be committed, and
either actually conceals it, or
d) does not within a reasonable time take proper steps to protect the interests of the
other beneficiaries, or
e) has deceived the trustee and thereby induced him to commit a breach of trust,
the other beneficiaries are entitled to have all his beneficial interest impounded

9
(1859) 3 D. Co. & J.563, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 311, (Central Law
Agency, Allahabad, 4th ed. 7 Reprinted 2011)

10
Compare section 33 of the Indian trust act, 1882, Singh G.P., Principle of Equity p. 387, (Central Law Agency,
Allahabad, 9th edn and Reprint, 2015)

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 as against him and all who claim under him (otherwise than as transferees for
consideration without notice of the breach) until the loss caused by the breach has
been compensated.
When property has been transferred or bequeathed for the benefit of a married woman, so
that she shall not have power to deprive herself of her beneficial interest, nothing in this
section applies to such property during her marriage.

69. Rights and liabilities of beneficiary's transferee.-Every person to whom a beneficiary

transfers his interest has the rights, and is subject to the liabilities, of the beneficiary in respect of
such interest at the date of the transfer.

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Case Law’s –
1. In Sunders V. Vauiter, 11 The trustee was directed to accumulate the
income upon a legacy until a specified date. The court held that as
soon as the beneficiary became of age, he could require the trustee at
once to convey the capital amount of them.

2. Hem Chandra v. Surdhani Debi12, It has been held that the

beneficial interest of a person under a trust is not technically
regarded as an equitable estate in India; there is nothing to prevent such
person from transferring such interest.

11
(1841) Cr. Ph. 240, Singh G.P., Principle of Equity p. 374, (Central Law Agency, Allahabad, 9th edn and
Reprint, 2015)

12
AIR 1940 PC 134, Ahmed Aqil, Equity Trust and Mortgage & Specific Relief Act, p. 304, (Central Law Agency,
Allahabad, 4th ed. 7 Reprinted 2011)
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CONCLUSION - I would like to conclude that beneficiaries have many right and some
liabilities to the trust property. They use his right in well manner and they do not exercise his
right the right given in the Act. From the above discussions on the doctrine and various
case laws, it is evident that the state is not the owner of the natural resources in the
country but a trustee who holds fiduciary relationship with the people. The Indian Trusts
Act 1882 deals with all the matters related to trusts, trustee and beneficiaries. 9

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BIBLIOGRAPHY

 BOOKS:

Name of Author: Ahmad, Aquil

Book Title: Equity: Trust, Mortgage and Specific Relief Act.
Publisher City: Allahabad
Publisher Name: Central Law Agency

Year Published: 2008 (14th Edition: Reprint 2011)

Name of Author: Singh G.P.

Book Title: Equity: Principal of trust and equity.
Publisher City: Allahabad
Publisher Name: Central Law Agency

Year Published: 2013 (9th Edition: Reprint 2015)

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